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Ruby Tuesday,
RT -2.5185185185185186%Ruby Tuesday Inc.U.S.: NYSEUSD6.58
-0.17-2.5185185185185186%
/Date(1425420041811-0600)/
Volume (Delayed 15m)
:
266799AFTER HOURSUSD6.58
%
Volume (Delayed 15m)
:
3193
P/E Ratio
N/AMarket Cap
418756487.846375
Dividend Yield
N/ARev. per Employee
34748.6More quote details and news »RTinYour ValueYour ChangeShort position
a casual-dining chain that foundered after moving upmarket during the recession. Under CEO J.J. Buettgen, a former Darden Restaurants (ticker: DRI) executive who joined Ruby Tuesday in December, the company has closed underperforming stores and is working to reposition the brand and menu as more affordable and casual to appeal to a more diverse customer base. The moves could boost same-store sales, fatten profit margins, and lift the shares.

Ruby's attempt to compete with pricier chains such as Outback Steakhouse and Red Lobster hurt sales and sank the stock (RT) in the late 2000s. Shares fell to less than $1 in 2009 from a peak of $33 in 2006, before rebounding to a recent $7.37.

Management is targeting Ebitda, or earnings before interest, taxes, depreciation, and amortization, of $125 million to $135 million in three years. That's roughly 40% higher than the $92.5 million expected this year.

Ben Claremon, an analyst at Cove Street Capital, recently said the shares could be worth $13 if Ebitda margins return to 12% in three years from a current 8%. They're down from 16% in 2007.

Founded in 1972 by former Chairman and CEO Sandy Beall, Ruby Tuesday owns and operates 709 Ruby Tuesday stores and franchises an additional 77 stores in 45 states and 11 countries. The company also operates Lime Fresh Mexican Grill, Marlin & Hay's, Truffles Grill, and Wok Hay. For the fiscal year ending in May, Ruby could earn $15 million, or 26 cents a share, on revenue of $1.28 billion. Earnings are expected to rise 31% in fiscal 2014, to 34 cents, driven by cost cuts.

A shake-up began in 2011 when activist investor firm Becker Drapkin, together with Carlson Capital, acquired more than 5% of the company and elected two new directors to the board. Last year, Beall, who served as CEO for 40 years, and the chief financial officer announced their retirement.

In addition to closing 29 underperforming Ruby units, new management is exiting other brands, except Lime Fresh, to focus on sales growth at Ruby. New menu items, including the return of the popular Smoky Mountain Chicken, could help.

Buettgen plans to curb couponing and increase spending on TV ads. In another change, Ruby has begun monetizing some of its 340 owned properties, which could be worth more than $500 million in sale-leaseback transactions.

RUBY IS EXPECTED to generate $34 million in free cash flow this year. It plans to buy back shares and pay down more of its $283 million in net debt. In January, the buyback program was increased by 10 million shares, to 12.7 million, or 20% of those outstanding at current prices.

Buettgen is well compensated for success. His 250,000 options come into the money at $14 a share. That's another appetizing thought for shareholders.